TCS under section 206 Income Tax Act in India

 A new section 206C(1H) has been introduced under income tax act in last budget applicable with effect from 01.10.2020. 

Broader Applicability of section - if the total turnover of FY19-20 crossed Rs. 10Crores. 

Brief of this section - 

1. The person (being the seller of any goods) is required to collect tax at source (TCS) @ 0.10% on COLLECTION of sales from buyer, if the total collection exceeds Rs. 50 Lakhs per person in aggregate in a financial year.

2. Monthly collection of such tax at source (TCS) to be paid within 7th day of next month. 

Noting point -

A. Here collection means only collection. Collection may be against any sales made prior to 01.10.2020 or of any previous years even. 

B. Collection means including GST or any taxes levied. (However, a clarification must come on this point to exclude GST portion, but till today no clarification issued)

Practical examples - 

Eg. (a)Suppose total collection of a single party in a year is Rs.45 Lacs, then such TCS provision is not applicable.

(b) Suppose total collection of a single party in a financial year is Rs. 75Lacs, then TCS is to be collected on 25 lacs (75lakhs minus 25 Lakhs)

To do - 

So accordingly plan your business / operation and incorporate it in your sales order systems and also inform the applicable buyers to pay such extra money (TCS) w.e.f 01.10.2020 over and above the amount of original invoices raised. 

And obviously the buyer will get credit of such TCS.

Written by :

CA Yogesh Birla

Director
Birla WP Management
visit us at : www.YogeshBirlaCA.Blogspot.com